Type Of Crypto-Assets That You Can List At BTCBAM’s Decentralized Exchange

Token Legal Review

The first thing to check in the legal review is the type of token. A token can be classified as (crypto) currency, utility or security or a combination of these.

· Currency: they are the most well-known and widespread tokens, the main example being Bitcoins, they carry an intrinsic value that is established by the market.

· Utility: these are tokens that enable owners to use the services provided by a (semi) decentralized platform. An example is Ethereum, which in addition to being a cryptocurrency is also a token utility that allows access to the decentralized computing service of the eponymous network.

· Security: are tokens that guarantee annuity rights (and governance in the case of equity) on the proceeds of a (semi) decentralized business.

Utility vs Security

2017 was characterized by the ICO capitalization boom, however many tokens distributed as utilities behaved like security, whose issuance is strongly regulated and requires licenses for marketing, going to break the regulatory policies of many countries in which they were distributed.

In order to verify the correct nature of the token being issued, a simple verification tool called Howey Test is used.

The Howey Test was introduced by the SEC (USA), but the criterion can be considered valid also in other jurisdictions. It is used to verify that our token issue is an ICO (issuance utility token) or an STO (security token issue).

The test is divided into the following questions:

1. Are we making an investment of money?

2. Is our investment in a joint venture?

3. Do we have profit expectations?

4. Is this profit generated by the effort of others?

If we get to the fourth question with an affirmative answer, we are dealing with a security tool.